Question

On January 1, Year 1, the Starshina Company paid $25,000 for a photocopier with an estimated useful life of 4 years, and an estimated residual value of $5,000. The company uses the straight-line method. What is the amount of depreciation expense for Year 2?

Answer 1

Answer:

The amount of depreciation expense for Year 2 is $ 10,000.

Explanation:

Determine the rate of depreciation per year.

Rate of depreciation = depreciation base/Useful life

Useful life = 4 years

Depreciation base = Acquisition cost - Residual/Salvage value

Depreciation base = 25.000 - 5,000

Therefore depreciation base = $20,000

Rate of depreciation = depreciation base/Useful life

Rate of depreciation = 20,000 / 4

Rate of depreciation = $ 5,000.

Determine the amount of depreciation expense for year 2.

Amount of depreciation expense = Rate of depreciation × Number years

Amount of depreciation expense = 5,000 ×  2

Amount of depreciation expense = $10, 000.